Although the life insurance market has a lot of potential, it needs to be seen why this is not being received with enthusiasm by consumers.
Lack of credibility
According to data announced by the Vietnam Insurance Association in mid-August on the insurance market in Vietnam, in the first six months of the year the number of new contracts for life insurance reached 1,496,180, an increase of 18% compared with the same period last year. However, the total new insurance premium revenue for the whole market decreased by 2.3% over the same period, reaching only VND 25,111 bln. Specifically, in the first four months of the year, the whole market received about 926,000 life insurance contracts, down 23% compared to the same period last year. New insurance premium revenue in the first four months also decreased by 8%, reaching about VND 15,000 bln.
Many people believe that despite the decline in growth, Vietnam's life insurance market is still attractive in the eyes of some investors. Currently, the country has about 10 mln people who have registered for life insurance, which is equivalent to 10% of the population. The life insurance market has many factors driving its growth and one of these is the rapidly growing middle class. It is forecast that by 2025, 15% of the population will have registered for life insurance.
All the same, life insurance in Vietnam is still very difficult. For more than 20 years, life insurance businesses have launched countless advertisements and sales programs but have so far only been able to reach out to 10% of the population. The rate of cancellation of insurance contracts is also increasing, especially through the banking channel of bancassurance.
At a meeting of the Semi-Full-Time Committee in Life Insurance of the Bancassurance Board, chaired by Mr. Ngo Trung Dung, Deputy General Secretary of the Vietnam Insurance Association in July, all members of Bancassurance acknowledged the biggest problem that life insurance businesses are facing when selling via banks is the low contract maintenance rate. Up to now, many people are still avoiding it when offered life insurance. Therefore, it is difficult to answer whether the forecast of 15% of the population participating in life insurance in 2025 will come true or not.
Ms. Thu Giang, a long-time worker in the life insurance industry, spoke with Saigon Investment on some problems facing the insurance industry. She said that most of the consulting staff of companies or agents working for life insurance companies are untrained, such as new fresh graduates who have not yet found a job, or those who have just lost their job, or people who want to work part-time to make a small income.
Because such recruits do not really consider this as their main job, they also do not pay attention to learning and good performance. In addition, they are always eager to sign the first contract as soon as possible because the commission in the first year is often quite high. They smooth talk clients and persuade them to buy the package, with little attention to affordability and whether the product package really fits the need of the consumer.
According to Ms. Thu Giang, many terms in the insurance contracts are quite confusing not only for buyers but also for the consultants. This leads to many problems in the future, and when the consumer needs assistance then the consultant is nowhere to be seen. Because of such incidents, the image of life insurance has fallen greatly.
Of course, it is not possible to blame all the consultants, but the role of life insurance businesses suffers due to such factors. Hired consultants for life insurance must take this profession seriously and not just consider it as a stopgap job. Many businesses claim to be on the path of digital transformation to better serve their customers, but with a multi-year contract like life insurance the role of a consultant may not be easy to replace.
In recent years many of the life insurance companies have signed exclusive contracts with banks to sell insurance through their channel. In this case the advisors are the bank staff who lack knowledge of insurance even more, so they force customers to buy insurance through loans. This is when the issue of customer care and after-sales service becomes uncertain. This is also why bank-bought insurance policies are currently experiencing an alarming rate of cancellation after the first year.
In addition to those who are forced to buy life insurance when taking out a loan from a bank, there are others who buy it to support their family members so that they can get their first insurance policy. This is also the reason why buyers are often careless about reading insurance policies or are not careful in choosing the right product for their needs or their families, which makes a life insurance policy difficult.
When buying a policy through acquaintances, after-sales care is often left open thereby creating more stress for buyers. Up to now, the number of people who voluntarily buy life insurance because they understand the benefits it brings are probably still not many in number. Many consumers still do not understand what a life insurance policy is all about.
Another reason that leads to buyers turning away from life insurance policies is the chance of an insurance fraud. Mr. Ngô Trung Dũng shared that currently there is no official data on insurance fraud, but in recent times insurance companies have reported more and more cases related to insurance fraud in professional meetings of the association. Vietnam's life insurance market probably needs more regulations for both sellers who are in the business as well as stronger sanctions for profiteering buyers. Only then will there be the expected development and credibility for life insurance policies.